What Packaged-Food CEOs Are Saying About Advertising

Kraft, Campbell General Mills Embrace Digital and Innovation; Ad- Production Costs in Crosshairs

Battered in recent years by a one-two punch of rising commodity costs and a sluggish economy, consumer packaged-foods executives seemed to breathe a collective sigh of relief as they gathered this week at a financial conference at a posh resort in Boca Raton, Fla.
Ian Friendly

"It's just getting a bit more buoyant," Ian Friendly, General Mills' exec VP-chief operating officer for U.S. retail, told reporters after presenting this week at the annual Consumer Analyst Group of New York meeting. However, "I think caution is the correct term," he added. "It's been more challenging the last two years in the food industry," but "I think we are finally seeing that normalize."

Still, in many ways the industry is anything but normal. Companies are putting a big emphasis on innovation in order to keep up with the rapidly changing consumer tastes and habits. And even as the economy improves and commodity inflation moderates, there is a feeling that consumers are not about to give up their quest for value.

Shoppers "remain very discerning around product choices that they make," said Sean Connolly, CEO of meat marketer Hillshire Brands. "Their household balance sheets remain stretched and so they are trying to get the best bang for their buck," he added. That, he said, puts pressure on marketers to ensure that products are "provocative and offer real tangible benefits."

And that doesn't always mean more ad spending.

General Mills, the nation's largest pure-play packaged-food advertiser, is taking a hard look at its outlays. "And we're certainly finding lots of ways to reduce what we call 'non-working expenditure' in media, things like ad production," Mr. Friendly told financial analysts. Combined with more digital spending, "it's a much more efficient approach," he said. The company has also moved some money away from its media budget to support price promotions, although going forward it plans to increase media spending "roughly in line with sales," said CEO Ken Powell. "We see that's important, particularly as we continue to launch a lot of new products and brands that we want to create trial and awareness for."

Among those new products is yet another Cheerios line extension: Honey Nut Cheerios Medley Crunch, which hit stores in January. And the marketer continues to seek a comeback in the yogurt category by putting heavy emphasis on its Yoplait Greek 100-calorie yogurt, which launched last fall.

Companies planning ad increases include Hershey Co. and Kraft Foods Group. Kraft is playing a bit of catch-up, after under-investing in its brands for years, said CEO Tony Vernon. "We have approximately 15 brands advertising at share of market standards," he said. "That leaves 45 brands at Kraft that are below their share of market, but I'm confident that we'll get there cost effectively." At the same time, the marketer is eyeing bigger innovations.

Campbell Soup Co. has dialed back its ad budget, but CEO Denise Morrison said that in the case of its Chunky brand, the marketer got better results. "Consumption is up 8% in the first half; advertising spending is actually down 18%," she said, crediting the brand's return to NFL-themed marketing.

The soup giant is also embracing digital more than ever before, as are most food marketers. For instance, Campbell eschewed traditional media when rolling out its new line-up of Campbell's Go microwavable soup pouches, relying almost entirely on social and digital media as the company puts a new emphasis on millennials. Promotions have included making the soup a launch sponsor for the Angry Birds Star Wars game release, in addition to programs with Spotify and BuzzFeed, where it co-develops content meant to be shared across the internet. "These are not the historic groups for M'm! M'm! Good!" Ms. Morrison quipped.

J.M. Smucker Co., whose brands include Jif and Folgers, said it is now dedicating 15% of its total marketing budget to digital for its U.S. retail business. And recently the marketer debuted a mobile ecommerce site, said CEO Richard Smucker, citing a Kantar Media forecast that online-grocery sales will grow from 1% today to 4% by 2020.

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E.J. Schultz

E.J. Schultz is the Chicago Bureau Chief at Advertising Age and covers beverage, automotive and sports marketing. He is a former reporter for McClatchy newspapers, including the Fresno Bee, where he covered business and state government and politics, and the Island Packet in South Carolina. His journalism awards include a 2012 Jesse H. Neal National Business Journalism Award for best range of work by a single author and a 2011 Best in Business award for a feature story from the Society of American Business Editors and Writers. A native of Cincinnati, Mr. Schultz has an economics degree from Xavier University and a masters in journalism from Northwestern University.